INTEGRATED REPORT 2018 - RUN AIRPORTS DEVELOP AIRPORTS GROW OUR FOOTPRINT - Parliamentary Monitoring Group

 
AIRPORTS COMPANY SOUTH AFRICA INTEGRATED REPORT 2018
                                                                            INTEGRATED
                                                                                   REPORT
                                                                                      2018
                                                                                   RUN AIRPORTS
                                                                               DEVELOP AIRPORTS
                                                                             GROW OUR FOOTPRINT

WWW.AIRPORTS.CO.ZA
AIRPORTS COMPANY SOUTH AFRICA

                                Abbreviation    Definition
                                ACI             Airports Council International                                 ISO         International Standards Organisation
                                ACSA            Airports Company South Africa SOC Ltd                          IT          Information technology
                                AGM             Annual general meeting                                         KIM         Kimberley Airport
                                AMC             Airport management centre                                      King IV     King Code of Governance for South Africa 2016™
                                AMSIS           Airport Management Share Incentive Scheme                      KPI         Key performance indicator
                                APEX            Airport excellence in safety                                   KSIA        King Shaka International Airport
                                ASQ             Airport Service Quality                                        LMJVC       La Mercy Joint Venture Company
                                ATM             Air traffic movements                                          LTI         Long-term incentive
                                B-BBEE          Broad-based black economic empowerment                         MAP         Million annual passengers
                                BFN             Bram Fischer International Airport                             MOI         Memorandum of incorporation
                                CEO             Chief Executive Officer                                        MOU         Memorandum of understanding
                                CFO             Chief Financial Officer                                        MIAL        Mumbai International Airport Private Limited
                                CIO             Chief Information Officer                                      NTM         National Transport Movement
                                Companies Act   Companies Act, No. 71 of 2008                                  NBAC        National bid adjudication committee
                                COO             Chief Operating Officer                                        NDP         National Development Plan
                                CPG             Contract participation goal                                    NEHAWU      National Education, Health and Allied Workers Union
                                CPI             Consumer price index                                           NUMSA       National Union of Metalworkers of South Africa
                                CSI             Corporate social investment                                    ORTIA       O.R. Tambo International Airport
                                CSIA            Chhatrapati Shivaji International Airport                      PFMA        Public Finance Management Act, No. 1 of 1999
                                CTIA            Cape Town International Airport                                PIC         Public Investment Corporation
                                DFI             Development Finance Institution                                PLZ         Port Elizabeth International Airport
                                DoT             Department of Transport                                        (Pty) Ltd   Proprietary Limited
                                EAP             Economically active population                                 ROE         Return on equity
                                EBITDA          Earnings before interest, tax, depreciation and amortisation   ROCE        Return on capital employed
                                EIA             Environmental impact assessment                                SAIBPP      South African Institute of Black Property Practitioners
                                ELS             East London Airport                                            SAFA        South African Football Association
                                EMS             Environmental management system                                SANS        South African National Standards
                                ESAT            Employee satisfaction survey                                   SAATM       Single African Air Transport Market
                                ESD             Enterprise supplier development                                SEE         Social Economic and Environment
                                GDP             Gross domestic product                                         SCM         Supply chain management
                                GHG             Greenhouse gas                                                 SED         Socio-economic development
                                GRU             Guarulhos International Airport                                SMEs        Small and medium-sized enterprises
                                GruPar          Guarulhos Participações S.A                                    SOC         State-owned company
                                Ha              Hectares                                                       SPE         Special purpose entity
                                ICAO            International Civil Aviation Organisation                      STI         Short-term incentive
                                IFRS            International Financial Reporting Standards                    TAAG        TAAG Angola Airlines (National Airline of Angola)
                                IIA             Institute of Internal Auditors                                 TMPS        Total measurable procurement spend
                                IIRC            International Integrated Reporting Council                     UTN         Upington International Airport

                                                                                                                                                                                     GREYMATTER & FINCH # 12050
TABLE OF CONTENTS

   4   ABOUT OUR INTEGRATED REPORT

   6   COMPANY OVERVIEW                                  REFERENCE INFORMATION
  12   STRATEGY
                                                              Run airports
  18   VALUE CREATION MODEL
                                                              Develop airports
  22   MATERIAL MATTERS
                                                              Grow our footprint
  36   TRANSFORMATION
                                                              Our business
  40   MESSAGE FROM THE ACTING CHAIRMAN
                                                              Our people and society
  44   MESSAGE FROM THE CHIEF EXECUTIVE OFFICER

                                                              Our environment
  52   MESSAGE FROM THE ACTING CHIEF FINANCIAL OFFICER

                                                              Online information
  60   PERFORMANCE REVIEW

                                                              Page reference
  92   GOVERNANCE AND REMUNERATION

 122   STATISTICAL REVIEW                                     Consolidated annual financial statements

 124   COMPANY INFORMATION                                    Assured by independent external auditor

                                                                                                         INTEGRATED REPORT 2018
                                                              Assured by internal audit team

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AIRPORTS COMPANY SOUTH AFRICA

                                HOW WE INTEGRATE
                                Airports Company South Africa SOC Ltd (the Company) owns and manages nine South African airports. The Company is involved in equity investments abroad and provides technical advisory and
                                consultancy services to other airports globally. Our majority shareholder is the South African Government (74.6%). In line with the government’s objectives, we focus on creating sustainable value that
                                positively impacts our business, our people and society, and our environment over the short, medium and long term. We do this by managing the Company in an integrated manner. The diagram below
                                illustrates how these processes inform our integrated thinking and our approach to reporting.

                                Appropriate governance controls and oversight are in place throughout the Company to ensure effective control, and a strong sense of ethics and legitimacy,
                                which is reflected in good performance. Refer to page 94

                                                                                                                                                                                                                                                                                                                                          “Embedded in
                                                                                                                                                                                                                                                                                                                                      our strategy is our
                                External focus                                      Internal focus                                      Holistic focus                                      Our strategic proposition                      Performance against strategy                Remuneration
                                Through our stakeholder engagement                  Our inward focus is on the risks                    Our holistic understanding of the                   Our strategy reflects our response             To reflect on the extent to which we        We remunerate our people based on             active contribution
                                process, we seek to understand the needs
                                and concerns of our valued stakeholders.
                                                                                    and opportunities highlighted by our
                                                                                    enterprise risk management system.
                                                                                                                                        challenges our Company faces and the
                                                                                                                                        opportunities available for improvement
                                                                                                                                                                                            plan in the short, medium and long term,
                                                                                                                                                                                            by setting objectives and explaining
                                                                                                                                                                                                                                           have succeeded in delivering against our
                                                                                                                                                                                                                                           strategy, we provide performance feedback
                                                                                                                                                                                                                                                                                       performance. This promotes the successful
                                                                                                                                                                                                                                                                                       execution of our strategy.
                                                                                                                                                                                                                                                                                                                                        to the evolution
                                  Refer to page 29.                                   Refer to page 32.
                                                                                                                                        and growth enables us to respond to                 how we aim to achieve them.                    in the following sections of our report:
                                                                                                                                                                                                                                                                                         Refer to page 113.                            of South Africa’s
                                                                                                                                        material matters.                                                                                    • Message from the Acting Chairman
                                Our commitment to stakeholders                       •   Regulatory environment
                                                                                                                                          Refer to page 25.
                                                                                                                                                                                              Refer to page 15.
                                                                                                                                                                                                                                               on page 42                                                                           democracy and the
                                                                                     •                                                                                                       •                                               • Message from the Chief Executive
                                To build purposeful and responsive
                                relationships with our stakeholders to               •
                                                                                         Skills
                                                                                         Transformation                                  •   Economic regulation                             •
                                                                                                                                                                                                    Run airports
                                                                                                                                                                                                    Develop airports                           Officer on page 46                                                                  empowerment of our
                                achieve agreed outcomes that support
                                sustainable value creation.
                                                                                     •
                                                                                     •
                                                                                         IT platform
                                                                                         Funding
                                                                                                                                         •
                                                                                                                                         •
                                                                                                                                             Technology and digitisation
                                                                                                                                             New growth opportunities
                                                                                                                                                                                             •      Grow airports                            • Performance review on page 62
                                                                                                                                                                                                                                             • Message from the Acting Chief
                                                                                                                                                                                                                                                                                                                                      country’s people.”
                                                                                                                                         •                                                  Our pledge to our customers                        Financial Officer on page 54                                                                          Deon Botha
                                                                                                                                             Safety and security
                                The main concerns and focus areas raised                                                                                                                     • To embed a culture of service                                                                                                                     Acting Chairman
                                                                                                                                         •   Access to and cost of funding
                                during our stakeholder engagement                                                                                                                                excellence                                In these chapters, we also provide an
                                                                                                                                         •   Transformation
                                processes were:                                                                                                                                              • To build an efficient customer-focused      outlook for expected future performance.                                                      Refer to message on page 42.
                                 • Create value for shareholders                                                                                                                                 business, while contributing to socio-
                                 • Airport safety and security                                                                                                                                   economic development
                                 • Understand passenger and
                                    partner needs
                                 • Transformation
                                 • Job creation
                                 • Sound financial performance,
                                    governance and regulatory compliance                                                                                                                    We ensure that our value creation model

                                                                                                                                                                                                                                                                                                                                                                        INTEGRATED REPORT 2018
                                                                                                                                                                                            utilises resources and relationships
                                Through our business review process, we
                                                                                                                                                                                            (our capitals) optimally and is structured
                                gain an understanding of changing global
                                                                                                                                                                                            to enable strategy execution and
                                trends and how these impact our operating
                                                                                                                                                                                            value creation.
                                environment.
                                  Refer to page 28.

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AIRPORTS COMPANY SOUTH AFRICA

                                ABOUT OUR INTEGRATED REPORT
                                                                                                                                                                                                          Supplementary reports                                                                                                                                            FORWARD LOOKING STATEMENTS
                                                                                                                                                                                                          Consolidated annual financial statements                                                                                                                         The forward-looking statements contained in this report,
                                OUR REPORTING PHILOSOPHY
                                                                                                                                                                                                                                                                                                                                                                           or oral statements that may be made by us or by officers,
                                We continuously strive to improve our reporting elements through disclosure and alignment to relevant reporting frameworks                                                Purpose and framework                                   Scope and boundary                             Assurance
                                                                                                                                                                                                                                                                                                                                                                           Directors, prescribed officers or employees acting on
                                and best practice. The Company seeks to provide investors and other stakeholders with relevant and material information about                                             Reports on the current and prior year                   Consolidated financial results                   •   Internal controls                                   our behalf, constitute, or are based on, various or certain
                                performance and our future prospects.                                                                                                                                     financial results and contains:                         for the Company and all                          •   Management and governance oversight                 assumptions which might change or be subject to revision.
                                                                                                                                                                                                            • Report of the audit and                             subsidiaries for the financial                   •   Internal audit                                      These statements involve risk and uncertainty, as they
                                OUR REPORTING SUITE                                                                                                                                                                                                                                                                                                                        relate to events and circumstances that may or may not
                                                                                                                                                                                                              risk committee                                      year ending 31 March 2018. The                   •   External audit opinion
                                The documents in the table below, including a digital version of the integrated report, can be found at www.airports.co.za                                                  • Directors’ responsibilities                         financial reporting boundary was                                                                         occur. Factors that could cause actual future results to differ
                                or by scanning this QR code.                                                                                                                                                                                                                                                                                                               materially from those in the forward-looking statements
                                                                                                                                                                                                              and approval                                        determined in accordance with
                                                                                                                                                                                                                                                                                                                                                                           include, but are not limited to: global and domestic economic
                                                                                                                                                                                                            • Company Secretary’s certification                   IFRS. Refer to the legal structure
                                                                                                                                                                                                                                                                                                                                                                           conditions; the nature of the aviation sector and specifically
                                 This integrated report (our primary report)                                                                                                                                • Report of the Auditor-General                       on page 10.                                                                                              the performance of airline operators; changes in passenger
                                                                                                                                                                                                              to Parliament                                                                                                                                                profiles and choices; retail offerings; interest rates; credit and
                                 Purpose and framework
                                 A report to providers of financial capital
                                                                              Scope and boundary
                                                                              The report contains material
                                                                                                                    Assurance
                                                                                                                     • Management and governance oversight.
                                                                                                                                                                    Our integrated reporting process        • Directors’ report                                                                                                                                            the associated risks of borrowing and funding; rating agencies’
                                                                                                                                                                                                            • Consolidated annual                                                                                                                                          outcomes; gross and operating margins; capital management;
                                 and other stakeholders stipulating           information on Company                 • The strategic objectives were internally            has matured over the past          financial statements                                                                                                                                         and competitive and economic regulatory factors. Airports
                                 a long, medium and short-term view           performance across all areas of          and externally assured, and audited by                                                                                                                                                                                                              Company South Africa does not undertake to update or revise
                                 of value creation.                           operation for the financial year         the Auditor-General of South Africa as per      five years to include quarterly    The report was developed using the                                                                                                                               any of these forward-looking statements publicly, whether
                                                                                                                                                                                                          following frameworks and standards:                                                                                                                              to reflect new information or future events or otherwise.
                                 The report was developed using the
                                                                              1 April 2017 to 31 March 2018
                                                                              (the financial year).
                                                                                                                       the Public Audit Act of South Africa,
                                                                                                                       No. 25 of 2004.
                                                                                                                                                                     integrated reports presented to        • IFRS                                                                                                                                                         The forward-looking statements have not been reviewed
                                 following frameworks and standards:                                                                                                                                        • Companies Act
                                   • IIRC’s International Integrated          Our materiality determination
                                                                                                                     • The National Treasury’s Framework for
                                                                                                                       Managing Programme Performance
                                                                                                                                                                    the board by our Chief Executive        • PFMA
                                                                                                                                                                                                                                                                                                                                                                           or reported on by the Company’s external auditor.

                                                                                                                                                                                                                                                                                                                                                                           BOARD APPROVAL
                                     Reporting  Framework
                                   • IFRS
                                                                              process is defined on page 24
                                                                                                                       Information confirms that performance        Officer. This embeds the process      Results presentation1                                                                                                                                            The board acknowledges responsibility for overseeing the
                                                                               We disclose relevant internal and       information is useful if indicators and
                                   • Companies Act
                                   • PFMA
                                                                              external factors that substantially      targets are well defined, verifiable,             of managing, measuring and       Provides investors with a high-level summary of:
                                                                                                                                                                                                           • Operational performance
                                                                                                                                                                                                                                                                                                                                                                           integrity and completeness of this integrated report and
                                                                                                                                                                                                                                                                                                                                                                           exercises this responsibility with the support of various
                                   • King IV
                                                                              influence our business where
                                                                              applicable.
                                                                                                                       attainable, specific, measurable, time
                                                                                                                       bound and relevant. We considered these
                                                                                                                                                                           reporting on our business,      • Financial performance                                                                                                                                         sub‑committees. The board approved the reporting frameworks
                                                                                                                                                                                                                                                                                                                                                                           and materiality determination process applied the report.
                                   • ISO/SANS 31000                                                                                                                                                        • Short, medium and long-term strategy
                                                                              There were no restatements
                                                                                                                       elements in finalising the information
                                                                                                                       presented in this integrated report. The
                                                                                                                                                                          our people and society, and     Value creation model1
                                                                                                                                                                                                                                                                                                                                                                           The board confirms that, after applying its collective mind to
                                                                                                                                                                                                                                                                                                                                                                           the preparation and presentation of the report and reviewing
                                                                              to comparatives unless
                                                                              otherwise stated.
                                                                                                                       external audit opinion on the consolidated       our environment, in line with     Additional information on the value creation model.                                                                                                              the content herein, it considers this report to be accurate,
                                                                                                                                                                                                                                                                                                                                                                           reliable and complete in presenting information and material
                                                                                                                       annual financial statements 2018 includes
                                                                              The financial reporting boundary         a summary of the work performed against         our Sustainability Framework.      Board and executive curricula vitae1                                                                                                                             matters. The board concludes that this report is presented per
                                                                              was determined in accordance                                                                                                A comprehensive overview of the skills and competencies of our board and Executive Committee members.                                                            the  Framework and approved the 2018 integrated report
                                                                                                                       our strategic objectives.
                                                                                                                                                                                                                                                                                                                                                                           on 30 July 2018.
                                                                              with IFRS.                                                                                                                  1
                                                                                                                                                                                                              	These supplementary reports were not developed using any specific framework or standard and were subject to management oversight and internal control to
                                                                                                                                                                                                                ensure integrity of information.

                                                                                                                                                                                                                                                                           If you wish to contribute to the improvement of our integrated report

                                                                                                                                                                                                                                                                                                                                                                                                                                                 INTEGRATED REPORT 2018
                                                                                                                                                                                                                                 FEEDBACK                                  through comments, or if you have any queries, email Refentse Shinners,
                                                                                                                                                                                                                                                                           our Group Executive: Corporate Affairs at Refentse.Shinners@airports.co.za.                     Deon Botha            Bongani Maseko         Dirk Kunz
                                                                                                                                                                                                                                                                                                                                                                           Acting Chairman       Chief Executive        Acting Chief Financial
                                                                                                                                                                                                         All reports in the table above, including a digital version of the integrated report, can be found at www.airports.co.za.                                                               Officer                Officer

                                                                                                                                                                                                                                                                                                                                                                                                                                                   5
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AIRPORTS COMPANY SOUTH AFRICA

                                COMPANY OVERVIEW

                                                   “In July 2018, we celebrate the
                                                   25-year anniversary of Airports
                                                   Company South Africa as a leading
                                                   provider of airport services”
                                                   Bongani Maseko Chief Executive Officer

                                                                                            INTEGRATED REPORT 2018
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AIRPORTS COMPANY SOUTH AFRICA   COMPANY OVERVIEW CONTINUED

                                OUR MANDATE                                                                                             OUR GEOGRAPHIC FOOTPRINT                                                                                                                              Aircraft                   Departing
                                Airports Company South Africa is mandated to undertake                                                                                                                                                                                                        landings                   passengers
                                the acquisition, establishment, development, provision,
                                maintenance, management, operation and control of any                                                                                                                                                                                                                     2016                            2016
                                airport, any part of any airport, or any facility or service at any                                                                                                                                                                                                       284 285                         19 374 239
                                airport normally related to an airport function. This mandate
                                is in line with the Airports Company Act, No. 44 of 1993,                                                                                                                       INDIA                                                                                     2017                            2017
                                as amended.                                                                                                                                                                     Chhatrapati Shivaji International                                                         282 057                         20 001 961
                                                                                                                                                                                                                Airport in Mumbai is an equity
                                SHAREHOLDING                                                                                                                                                                    investment.
                                                                                                                                                                                                                                                                                                          2018                            2018
                                The Company is a Schedule 2 public entity in terms of the                                                                                                                                                                                                                 264 457                         20 836 852
                                PFMA and operates as a legally and financially autonomous                                                                                                                     SOUTH AFRICA STATISTICS
                                company within the legal framework outlined in the
                                Companies Act, No 71 of 2008.                                                                                                                                                                                                          Annual
                                                                                                                                                                                                                                                    Total annual    passenger                               On-time
                                74.6%                                                                                                                                                                                                                 departing    throughput      Aircraft   Permanent performance2                 ASQ category
                                20.0%                                                                                 GHANA                                                                                         Location                         passengers       capacity1   landings    employees           %             ASQ3 group average
                                 4.2%
                                                                                                The Company performs technical                                                                                      O.R. Tambo
                                 1.2%                                                                                                                                                                          1                                      10 662 446     28 000 000    110 286        1 143          84.55           3.96            4.33
                                                                                             advisory and consultancy services at                                                                                   International Airport
                                                                                            Kotoka International Airport in Accra.                                                                                  Cape Town
                                                                                                                                                                                                               2                                       5 404 706     14 000 000      51 497         549          86.66           4.06            4.15
                                                                                                                                                                                                                    International Airport
                                                                                                                                                                                                                    King Shaka
                                                                                                                                                                                                               3                                       2 819 458      7 500 000      27 058         384          85.90           4.16            4.15
                                                                                                                                                                                                                    International Airport
                                                                                                                                                                                                                    Port Elizabeth
                                                                                                                                                                                                               4                                         821 735      2 000 000      26 992         122          84.10           4.00            4.14
                                                                                                                                                                                                      1             International Airport
                                                                                                                                                                                                                    Bram Fischer
                                                                                                                                          BRAZIL                            6         9       5                5                                         199 095       600 000        9 936         68           79.35           3.87            4.14   SOUTH AFRICA LEGEND
                                                                                                                                                                                                          3         International Airport
                                                                                                                  Guarulhos International Airport in
                                                                                                                  São Paulo is an equity investment.                                                                Upington                                                                                                                                      International airport
                                                                                                                                                                                                               6                                          33 113       100 000        3 671         23           83.80           4.28            4.14
                                     South African Government: The Department of Transport                                                                                                                          International Airport
                                     is our primary shareholder.                                                                                                                                  7
                                                                                                                                                                                                                                                                                                                                                                  Regional airport
                                                                                                                                                                                8         4
                                     Public Investment Corporation (PIC): The PIC shareholding is held                                                                  2                                       7   East London Airport                  411 373      1 200 000      13 521         67           81.13           3.92            4.14
                                     through ADR International Airports SA (Pty) Ltd, a wholly owned                                                                                                                                                                                                                                                              Equity investment or technical advisory and
                                     subsidiary of PIC.
                                                                                                                                                                                                                                                                                                                                                                  consultancy services
                                     Empowerment investors:                                                                                                                                                    8    George Airport                       398 511       900 000       17 051         65           81.13           4.23            4.14
                                     • 1.2% G10 Investments (Pty) Ltd
                                     • 1.4% African Harvest Strategic Investments                                                                           SOUTH AFRICA                                                                                                                                                                                NOTE:
                                     • 0.4% Pybus Thirty Four Investment (Pty) Ltd                                                                                                                              9   Kimberley Airport                     86 415       200 000        4 445         45           77.38           3.76            4.14
                                                                                                                                     We operate nine airports and provide technical
                                     • 0.8% Telle Investments (Pty) Ltd
                                                                                                                                                                                                                                                                                                                                                        1
                                                                                                                                                                                                                                                                                                                                                            Annual passenger throughput capacity includes both arriving and

                                                                                                                                                                                                                                                                                                                                                                                                                                  INTEGRATED REPORT 2018
                                                                                                                                     advisory and consultancy services for Mthatha                                                                                                                                                                          departing passengers.
                                     • 0.4% Upfront Investments 64 (Pty) Ltd
                                                                                                                                                        and Wonderboom airports.                                    Corporate                                 –              –           –          423             –                 –            –    2
                                                                                                                                                                                                                                                                                                                                                            On-time performance is the percentage of aircraft departures within
                                     Staff share incentive scheme: Dormant as the scheme                                                                                                                                                                                                                                                                    15 minutes of their slot time.
                                     is being dissolved.                                                                                                                                                                                                                                                                                                3
                                                                                                                                                                                                                                                                                                                                                            Airport Service Quality (ASQ) is a programme operated by the
                                                                                                                                                                                                                    TOTAL                             20 836 852     54 500 000    264 457        2 889          84.80           4.08              –        Airports Council International (ACI). It is a globally established
                                                                                                                                                                                                                                                                                                                                                            benchmarking programme measuring passengers’ satisfaction on a
                                                                                                                                                                                                                                                                                                                                                            scale of 1 (poor) to 5 (excellent).

                                                                                                                                                                                                                                                                                                                                                                                                                                   9
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AIRPORTS COMPANY SOUTH AFRICA   COMPANY OVERVIEW CONTINUED

                                OUR LEGAL STRUCTURE
                                Airports Company South Africa derives value from aeronautical and non-aeronautical operations, including local and international investments. This is structured as follows:

                                                                       100%-owned subsidiaries1                                                                                                                          Special purpose entities2                                                                                                   Investments in joint ventures5 Investments in associates6
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Guarulhos
                                                                                                                                                                                                                         Lexshell 342                        Airport Management                       Sakhisizwe                                     Airport Logistics                                  La Mercy JV                                                                                          International
                                                                       ACSA                                Airports Consultancy                 JIA Piazza Park                     Precinct 2a                          Investment Holdings                 Share Incentive Scheme                   Community                                      Property Holdings                                  Property                                           Mumbai International Airport                      Airport
                                 Name                                  Global Ltd                          and Advisory Services                (Pty) Ltd                           (Pty) Ltd                            (Pty) Ltd                           (Pty) Ltd                                Programme                                      (Pty) Ltd                                          Investments                                        Private Limited                                   Private Limited
                                 Purpose of existence                  The investment holding              The provision of airport             The holding company                 A company through which              An employee share option            Employee share incentive                 Non-profit company (education).                A property holding company                         A land development and property                    A company through which we hold                   A company in which we hold a
                                                                       company through which               consultancy and                      through which                       we own approximately                 entity, wholly owned by             scheme that holds                                                                       with the Bidvest group that owns                   investment company in collaboration                a 30-year concession (with the                    20-year concession to develop,
                                                                       Airports Company                    advisory services to                 we operate the                      250 hectares of land                 the Airports Company                investments (specifically                                                               three distribution warehouses at                   with Dube Trade Port Corporation.                  option to renew for another 30 years)             operate and maintain the Guarulhos
                                                                       South Africa holds its              airports in South Africa             InterContinental                    adjacent to O.R. Tambo               South Africa Kagano                 company ordinary shares)                                                                O.R. Tambo International Airport and               Our strategy is to build an                        to develop, operate and maintain the              International Airport in São Paulo.
                                                                       10% interest in the                 and internationally.                 Hotel at O.R. Tambo                 International Airport. The           Trust.3                             on behalf of the airport’s                                                              Cape Town International Airport.                   investment property portfolio at                   Mumbai Airport.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             We provide technical advisory and
                                                                       Mumbai International                This subsidiary will be              International Airport.              strategy is to redevelop                                                 participating employees.4                                                                                                                  King Shaka International Airport –
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             consultancy services.
                                                                       Airport Private Limited             leveraged to provide                                                     property for aeronautical                                                                                                                                                                                           Dube Trade Port through land-lease
                                                                       (refer to investments in            services for future                                                      and non‑aeronautical                                                                                                                                                                                                agreements.
                                                                       associates on                       prospects.                                                               purposes to grow rental
                                                                       page 11. )                                                                                                   property income.
                                 Year of inception                     2005                                2016                                 1998                                1998                                 1999                                1999                                     1996                                           2003                                               2009                                               2006                                              2012
                                 Airports Company
                                 South Africa shareholding 100%                                            100%                                 100%                                100%                                 SPE                                 SPE                                      SPE                                            50%                                                40%                                                10%                                               10.2%
                                 Other shareholders                    N/A                                 N/A                                  N/A                                 N/A                                  Airports Company                    Airports Company                         N/A                                            Bidvest Holdings Ltd                               Dube Trade Port Corporation                        (GVK) (50.5%)                                     A joint venture between Investments
                                 and their respective                                                                                                                                                                    South Africa                        Management                                                                              (50%)                                                                                                                                                   e Participações em Infrastructura
                                 shareholdings                                                                                                                                                                                                                                                                                                                                                          (60%)                                              Bidvest (13.5%)
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             S.A (Invepar) (80%) and Airports
                                                                                                                                                                                                                         Kagano Trust³                       Share Incentive Scheme
                                                                                                                                                                                                                                                                                                                                                                                                                                                           Airports Authority of India (26%)                 Company South Africa (20%), which
                                                                                                                                                                                                                                                             Trust
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             holds 51% of Guarulhos Participações
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             S.A (GruPar)
                                 Equity injections                     R100                                Nil                                  R100                                R100                                 Nil                                 Nil                                      Nil                                            Nil                                                R38 million                                        R347 million                                      R1.2 billion
                                 Net asset value at
                                 31 March 2018                         R541 million                        Nil                                  R30 million                         R125 million                         (R2 million)                        R13 million                              R0.5 million                                   R47 million                                        R170 million                                       R6.7 billion                                      (R3.5 billion)
                                ¹ Subsidiaries are all entities (including special purpose entities (SPEs)) over which the Company has the power to govern the financial and operating policies, generally with a shareholding of more than half of the voting rights.                            4
                                                                                                                                                                                                                                                                                                    Airport Management Share Incentive Scheme (AMSIS) exists only as a special purpose vehicle for the Management Trust and holds ordinary shares in Airports Company South Africa as an investment on behalf of its holding company, the Management Trust.
                                ² An SPE is a subsidiary of the Company that attempts to isolate risk to the parent company by maintaining its assets and liabilities on a separate balance sheet.                                                                                                  The Management Trust is dormant and has no beneficiaries, as all beneficiary shares were bought back during 2009. The Company intends repurchasing its ordinary shares from AMSIS and thereafter possibly winding up the Management Trust and AMSIS.
                                3
                                  The Airports Company South Africa Kagano Trust was formed under the Trust Property Control Act to administer the staff share scheme (until they were paid out in 2013), and to be a holding company with its two subsidiaries, Lexshell 342 and Lexshell 343.   ⁵ Joint ventures are entities over which the Company has joint control over the economic activity through a contractual planning arrangement. The Company recognises its interests in the joint venture using equity accounting.
                                  Lexshell 343, currently dormant, was specifically formed to hold Company share options should Airports Company South Africa list on the JSE. The Company intends repurchasing its ordinary shares from Lexshell 342 and possibly winding up the Kagano          ⁶ Associates are all entities over which Airports Company South Africa has significant influence but not control, generally with a shareholding of between 20% and 50% of the voting rights. Investments in associations are accounted for using the equity
                                  Trust, Lexshell 342 and Lexshell 343. The Kagano Trust is dormant and has no beneficiaries.                                                                                                                                                                       method of accounting and are initially recognised at cost.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                INTEGRATED REPORT 2018
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AIRPORTS COMPANY SOUTH AFRICA   COMPANY OVERVIEW CONTINUED

                                                             STRATEGY

                                                                        As a State-owned company, Airports Company South Africa has a greater
                                                                        mandate than simply delivering profitability for its shareholders. We are mandated
                                                                        to advance South Africa’s national agenda of economic growth and development
                                                                        while delivering a sustainably profitable business. We strive to fulfil this mandate

                                                                                                                                                               INTEGRATED REPORT 2018
                                                                        by conducting our business in an ethical manner that enables inclusive growth and
                                                                        creates sustainable value for all our stakeholders.

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AIRPORTS COMPANY SOUTH AFRICA   STRATEGY CONTINUED

                                Strategy                                                            Long-term horizons
                                Our three-pillar strategy, namely to Run airports,                  Our strategy is implemented over three time horizons to create                                Financial
                                Develop airports and Grow our footprint is supported by our         value over the short, medium and long-term.
                                Sustainability Framework. Each of these elements is aligned to
                                our mission, vision and objectives. We implement our strategy            Horizon 1
                                                                                                                                                                                                                                                                                                     Create value for shareholders
                                and measure our performance against a set of strategic                   By 2020:
                                                                                                                                                                                                                                                                                                                                                                    Diversify
                                                                                                                                                                                                                                                                                                                                                       Diversify business       business
                                                                                                                                                                                                                                                                                                                                                                          portfolio (2 & 3) portfolio
                                objectives and KPIs.                                                     Extend and defend our businesses
                                                                                                                                                                                                  Customer
                                Our mission                                                              Horizon 2
                                To develop and manage world-class airport businesses for the             By 2025:                                                                                                                                                                           Increase our reputation through demonstrated
                                benefit of all stakeholders.                                             Build emerging businesses and drive medium-term growth                                                                  Increase stakeholder satisfaction through                                business excellence
                                                                                                                                                                                                                                                                                                                                                           Improve the passenger experience through
                                                                                                                                                                                                                                            effective partnership                                                                                            demonstrated operational excellence
                                Our vision                                                               Horizon 3                                                                                Internal processes
                                To be a world-leading airport business.
                                                                                                         Beyond 2025:                                                Strategy map
                                Vision 2025                                                              Create viable options to ensure the Company’s success       Our strategy map depicts                                                       Run airports                                            Develop airports                                            Grow our footprint
                                To be the most sought after partner in the world for the                 in future                                                   our strategic objectives
                                provision of sustainable airport management services                                                                                 and KPIs in the context                                      By running our airports efficiently and                     Improving our capacity and infrastructure                  A larger footprint increases our exposure to
                                by 2025.                                                            Strategic outcomes          Our people and society               of our balanced scorecard.                               developing them innovatively, we will enhance                grows our footprint through effective operation             diverse methods, allowing us to learn and grow,
                                                                                                                                                                                                                                          the regional economy.                                          and partnerships.                                  and improve the way we run airports.
                                                                                                    The effective application of our strategy will result in the
                                Our values                                                                                                                           Our KPI performance in
                                                                                                    following strategic outcomes:
                                Our values are defined through the acronym PRIDE: Passion,                                                                           relation to our strategic                                                            Contribute to increase traffic through the airports we operate
                                                                                                     • Long-term sustainable value creation                          pillars and Sustainability                                                                                                                                                          Provide equitable access to safe airports in all
                                Results, Integrity, Diversity, Excellence.
                                                                                                                                                                                                                                                                                                                                                        South African regions to allow more people to fly
                                                                                                     • Strengthening our reputation and continuing to build          Framework is summarised                                                                        Improve connectivity to regions we serve
                                Sustainability Framework                                                 win‑win partnerships with our stakeholders                  on page 16.
                                                                                                                                                                                                                                                                                                  Reduce our environmental impact
                                Our Sustainability Framework comprises three elements                •   Continuously improving the passenger experience
                                that guide the fulfilment of our mandate and ensure that our         •   Becoming a digitised business                                                                                                                             Maintain and improve our contribution to broad-based black economic empowerment (B-BBEE)
                                decisions and actions support our journey towards Vision 2025:       •   Identifying and securing new business opportunities
                                                                                                     •   Managing and developing a high-performance team                                                                                                                                       Support black business entrepreneurship
                                         Our business                                                •   Accelerating sustainability and transformation                                                                                                                              Promote regional integration and localisation of our airports
                                Enhance our reputation, improve passenger experience, increase           programmes
                                stakeholder satisfaction, contribute to airport traffic and          •   Reducing our environmental impact
                                diversify our business
                                                                                                                                                                                                                                                                                                                                                              Foster a positive employee workforce
                                         Our environment                                                                                                                                                                                Improve Leadership Culture Index                   Achieve demographically represented workforce
                                                                                                                                                                                                                                                                                                                                                                        and environment
                                Minimise our environmental impact and strive to be
                                carbon neutral                                                                                                                                                    Organisational capacity
                                                                                                                                                                                                                            LEGEND

                                         Our people and society                                                                                                                                                                      Our business                                     Our environment                                    Our people and society

                                                                                                                                                                                                                                                                                                                                                                                                            INTEGRATED REPORT 2018
                                Contribute more to black economic empowerment and support
                                black business growth; provide improved access to airports for
                                South Africans; improve airport connectivity to the regions we
                                serve; diversify our workforce; and create a positive environment

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AIRPORTS COMPANY SOUTH AFRICA   STRATEGY CONTINUED

                                Our current strategic objectives, KPIs and initiatives
                                We believe that our strategy should be responsive to our stakeholders’ needs and our changing business environment. We appointed a Chief Strategy and Performance Officer to strengthen the
                                process of strategic development, implementation and monitoring in the Company. The following table summarises our performance related to the strategic pillars and Sustainability Framework,
                                with more detail provided throughout the integrated report.

                                            Strategic objectives                                                                 KPIs                                                                              2018                                                                                    Initiatives delivered in 2018

                                                                                                                                                                                                                                                          Run airports                                            Develop airports                                      Grow our footprint
                                              Our business                                                                                                                                                   Target       Actual
                                              Create value for shareholders                                                      Return on equity                                                  4.2%                            • Integrated data management across our airports            • Embarked on R891 million infrastructure              • Expanded provision of airport management services
                                                                                                                                                                                                                                     to improve efficiency and effectiveness of airport          investment programme                                   to Mthatha Airport and Kotoka International Airport
                                                                                                                                 Generate non-core income                                          R58.8 million                     management                                                • Strengthened project management for more effective     in Ghana
                                              Diversify business portfolio
                                                                                                                                 Non-aeronautical revenue as a percentage of total revenue         50%                             • Implemented digitisation strategy to strengthen             project delivery                                     • Formalised relationships with airport authorities
                                                                                                                                                                                                                                     safety and enhance customer experience                                                                             in Cameroon, Liberia and Namibia
                                              Increase our reputation through demonstrated business excellence                   Reputation Index                                                  ≥ 59
                                                                                                                                                                                                                                   • Strengthened stakeholder engagement with new key                                                                 • Established Gauteng Route Development Committee
                                              Increase stakeholder satisfaction through effective partnership                    Airport stakeholder satisfaction                                  3.7                               account model                                                                                                      and continued to collaborate with route development
                                                                                                                                                                                                   At least 7                                                                                                                                           agencies in Western Cape, KwaZulu-Natal and
                                              Improve the passenger experience through demonstrated operational excellence       Passenger satisfaction
                                                                                                                                                                                                   ranked airports                                                                                                                                      Eastern Cape
                                                                                                                                                                                                                                                                                                                                                      • Secured new routes linking St Helena and Rome
                                              Improve connectivity to regions we serve                                           Grow regional airport departing capacity                          5%
                                                                                                                                                                                                                                                                                                                                                        to Johannesburg, and Cologne to Cape Town; and
                                              Contribute to increase traffic through the airports we operate                     Increase ORTIA connectivity                                       135                                                                                                                                                  expanded flight offerings on seven existing routes
                                              Provide equitable access to safe airports in all South African regions to allow
                                                                                                                                 Participate in non-ACSA airports in South Africa                  40 service man days
                                              more people to fly
                                              Our people and society
                                              Promote regional integration and localisation of our airports                      Create job opportunities                                          22 414                          • Implemented transformation sector strategies in           • Introduced measures to accelerate socio-economic     • Developed young talent and implemented talent
                                                                                                                                                                                                                                     property, retail, car parking, advertising, information     growth in construction contracts                       mobility plan in support of business development
                                                                                                                                 Grow black business share of operational and developmental spend 48%
                                              Support black business entrepreneurship                                                                                                                                                technology and construction sectors to accelerate
                                                                                                                                 Grow black business share of commercial revenue generated         48%                               socio-economic growth
                                              Maintain and improve our contribution to B-BBEE                                    Achieve B-BBEE level                                              Level 3                         • Appointed ESD partner to facilitate transformation
                                                                                                                                                                                                                                     of supplier base
                                              Improve Leadership Culture Index                                                   Leadership Culture Index                                          ≥ 65%
                                              Achieve demographically represented workforce                                      Promote employment equity                                         92.4%
                                              Foster a positive employee workforce and environment                               Employee satisfaction survey                                      3.8
                                              Our environment
                                                                                                                                                                                                                                   • Achieved ACI Carbon level 1 re‑certification              • Secured an uncontested environmental impact
                                                                                                                                                                                                   ACI level mapping

                                                                                                                                                                                                                                                                                                                                                                                                              INTEGRATED REPORT 2018
                                              Reduce our environmental impact                                                    ACI carbon accreditation level                                                                      for four airports                                           assessment for runway realignment project at
                                                                                                                                                                                                   KSIA and PLZ
                                                                                                                                                                                                                                   • Preparing for level 2 accreditation                         Cape Town International Airport

                                LEGEND

                                       Target exceeded                                          Target achieved                                         Working towards achievement of target

                                                                                                                                                                                                                                                                                                                                                                                                              17
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AIRPORTS COMPANY SOUTH AFRICA

                                VALUE CREATION MODEL

                                                       We optimise our value creation model through
                                                       the effective implementation of our strategy to
                                                       achieve our strategic objectives and Vision 2025.

                                                                                                           INTEGRATED REPORT 2018
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AIRPORTS COMPANY SOUTH AFRICA   VALUE CREATION MODEL CONTINUED

                                How to read the value creation model: Review information from left to right for a complete picture of our business model and value creation process.
                                Where relevant, references to more detailed information are provided.                                                                                                                                                                                                                                     OUTCOMES                                   VALUE CREATED
                                                                                                                                                                                                                                                                                                                                          The inherent consequences of our
                                                                                                                                                                                                                                                                                        OUTPUTS                                                                                      To all our stakeholders
                                                                                                                                                                                                                                                                                                                                          activities
                                                                                                                                                                                       ACTIVITIES                                                                                       Our products, services and by-products
                                                                                                      INPUTS
                                                                                                                                                                                       The value chain activities and processes                                                                                                                                                      We have created value and contributed
                                                                                                      The six capitals required to create value                                                                                                                                                                                           Our business
                                                                                                                                                                                                                                                                                        Aeronautical                                       • Achieved 4.2% return on equity          to inclusive growth in South Africa1:
                                                                                                                                                                                       Our governance framework and                        Our three-pillar strategy is implemented:     • Aircraft landing, parking and                                                               • R9.5 BILLION to GDP
                                                                  TRANSFORMATION INTENT                                                                                                operating model ensure                                    • Run airports                                                                            • Improved Reputation Index
                                                                                                               Our business                                                                                                                                                                  passenger services                                                                        • R2.3 BILLION in taxes
                                                                  Imperatives that determine our                                                                                        • An ethical culture                                                                                                                               • Increased airport connectivity index
                                                                                                                                                                                                                                              		 • Develop airports                      • Cargo handling                                                                              • R2.8 BILLION in income
                                EXTERNAL AND                      definition of value                                                                                                   • Effective leadership                                                                                                                               for passengers
                                                                                                          Financial             Manufactured                Intellectual                                                                      		 • Grow airports                         • Passenger movement                                                                            to South African employees
                                INDUSTRY INFLUENCES                                                                                                                                     • Governance over all functional areas                                                                                                             • Generated non-core income
                                                                                                           • Capital expenditure • Nine airports              • Technical advisory                                                                                                      Non-aeronautical                                                                               • Government was our largest
                                Influencing our playing field
                                                                                                                                                                                        • Appropriately composed                                                                                                                           • Achieved 49% non-aeronautical revenue
                                                                 Transformation imperatives are              of R891 million     • Capacity for                 and consultancy                                                                                                          • Retail, car rentals, parking and advertising                                                  beneficiary at 42% of value
                                                                                                                                                                                          governance structures                                                                                                                              as a percentage of total revenue
                                                                 aligned to the NDP imperatives:           • Baa3 stable           55 million                 • Research and                                                                                                             • Property management and rentals – hotels,                                                     distributed
                                                                                                                                                                                                                                                                                                                                           • B-BBEE Level 2
                                                                                                              credit rating             passengers              development                                                                                                                  ground handling, tenants, and airline
                                Global increase                  SOCIAL IMPERATIVE                                                                                                                                                                                                                                                         • Created 24 741 job opportunities        We also comply with 12 of the 17
                                                                                                            • 4.2% return             • IT infrastructure     • Organisational                                                                                                          Non-core
                                in air traffic                   Socio-economic activities that                                                                                          BUSINESS MANAGEMENT                            BUSINESS OPERATIONS                                                                                                                          UN Sustainable Development Goals
                                                                                                              on equity                                         change                                                                                                                   • Technical and advisory services, airport
                                                                 empower communities to lead                                                                                                                                                                                                                                                                                         (SDGs).
                                Driven by population and GDP                                                • 22% gearing ratio                                                                                                                           Airport                            management solutions and training academy
                                growth, middle-class growth,     better lives                                                                                                              Strategy and performance
                                                                                                                                                                                                                                                        management
                                air service agreements and       MORAL IMPERATIVE
                                lower air fares                  Fair and equal opportunity for                                                                                                                                                                                         Societal                                          Our people and society
                                                                                                                Our people and society                                                                                                                                                  Support socio-economic transformation through:     • Demographically representative
                                Air transport market             the economically active, free of                                                                                          Integrated governance
                                                                 discrimination                                                                                                                                                                                             Technical                                                        employees
                                                                                                           Human                                  Social and relationship                                                                 Business       Enterprise                      •   CSI initiatives
                                Competitive forces in the                                                                                                                                                                                                                    service                                                       • Positive and accountable leaders
                                                                 ECONOMIC IMPERATIVE                        • 3 076 employees                      • Seven sector-specific                                                              development       security                       •   Preferential procurement
                                global, African and South                                                                                                                                                                                                                   solutions                                                      • Reputation score of 63.1
                                                                 Changing the face of business              • R40 million invested                   transformation strategies                                                                                                           •   Skills development
                                African air transport markets                                                                                                                              Corporate affairs                                                                                                                               • 259 additional job opportunities
                                                                 to reflect South Africa’s                    in skills development                • Stakeholder engagement                                                                                                              •   Education support
                                                                                                                                                                                                                                                                                                                                             created for young talent
                                Tourism                          demographics by supporting                 • 93.3% black employees                • R44 million invested                                                                                                                •   Multi-modal transport access
                                Consistent increase in the       and developing SMEs through                                                         in socio-economic
                                                                                                                                                                                           Transformation                                            Infrastructure asset
                                number of foreign tourists       company-specific strategies in                                                      development projects                                                                                management
                                and South Africans visiting      these sectors:
                                destinations abroad                •   IT                                                                                                                                                                                                               Environmental impacts and advances                Our environment
                                                                   •   Construction                             Our environment                                                                                                                                                          • Electricity consumption: photovoltaic plants    • ACI carbon re-certification             1
                                                                                                                                                                                                                                                                                                                                                                                         Airports Company South Africa Social, Economic and
                                Economic impacts                                                                                                                                       BUSINESS ENABLEMENT                                                                                                                                                                               Environmental impact study for FY2017
                                                                   •   Property                                                                                                                                                                                                              provide electricity to national grid            at four airports
                                Market activity and                •   Retail                              Natural                                                                            Financial                     Human      Information                 Supply chain          • Water consumption                               • Medium impact noise pollution
                                influences of global, African      •   Advertising                                                                                                           Management                    Resources   Technology                  management
                                                                                                            • Water, fuel and electricity usage                                                                                                                                          • Fuel consumption                                • Decreased fauna and flora diversity
                                and South African economies        •   Car rental

                                                                                                                                                                                                                                                                                                                                                                                                                                              INTEGRATED REPORT 2018
                                                                                                            • Water saving and augmentation plans                                                                                                                                                                                          • Reduction in available water
                                                                   •   Ground handling                      • Three photovoltaic plants
                                                                                                            • Eight ISO14001:2015 certified airports

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AIRPORTS COMPANY SOUTH AFRICA

                                MATERIAL MATTERS

                                                   We consider matters to be material if they have the potential
                                                   to substantially affect our ability to implement our strategy as
                                                   a State-owned company and fulfil our commitment to creating
                                                   and sustaining value for our stakeholders over the short,

                                                                                                                      INTEGRATED REPORT 2018
                                                   medium and long-term.

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AIRPORTS COMPANY SOUTH AFRICA   MATERIAL MATTERS CONTINUED

                                HOW WE DETERMINE MATERIALITY                                                                                                                                                                   HOW OUR RESPONSE TO MATERIAL MATTERS CREATES VALUE
                                Our material matters, which include risks and opportunities, are derived through an integrated assessment process conducted by our executives and approved                                     Our strategy is informed by our material matters. Throughout this report, we demonstrate how our strategic objectives generate sustainable value for our
                                by the board within the context of our overarching governance framework and operating model. This process is depicted below, followed by a more detailed                                       Company, our stakeholders and the broader society in which we operate. The following table demonstrates our strategic response to our material matters,
                                discussion on each stage of the process.                                                                                                                                                       the impact on stakeholders, and the trade-offs that were necessary to create value during 2018 and in the medium and longer term.

                                  IDENTIFY RELEVANT INTERNAL AND EXTERNAL MATTERS

                                     Business environment                                                                                                                                                                                                                        Business environment, risks and opportunities
                                         We assess local and global business conditions that have the potential to affect our business negatively or positively. This includes regular reviews of global megatrends,                                                              • Growing demand for air travel increases opportunity but places pressure on airport infrastructure
                                         aviation-specific trends and high-impact events. Refer to page 28.
                                                                                                                                                                                                                                             RUN AIRPORTS                         • Regulated charges for the use of airport facilities limit our ability to manage our core revenue
                                                                                                                                                                                                                                                                                  • Digitisation enables efficient airport operation but increases risk of disruption and cyber-crime
                                     Stakeholder engagement                                                                                                                                                                                                                       • Safety and security incidents threaten airport operations, passengers, tenants and employees
                                         We identify our stakeholders, review and analyse their concerns and needs in relation to our operating context, and engage with them. This process enables the Company                                                                   • We are mandated to operate ethically and to facilitate inclusive growth in South Africa
                                         to develop and sustain positive, value-creating relationships with stakeholders. Refer to page 29.
                                                                                                                                                                                                                                                            Our response to risks and                 Impact of our response on                                                           Trade-offs to achieve our desired
                                     Risks and opportunities
                                         A comprehensive risk analysis of our business informs our assessment of materiality and strategic decisions.     Refer to page 33.
                                                                                                                                                                                                                                Material matters            opportunities in 2018                     stakeholders in 2018 and beyond           Our desired outcome                       outcome
                                                                                                                                                                                                                                Economic regulation          • Active engagement with                   • Appropriate revenue decision            • Achieve return on equity target       35.5% tariff decrease mitigated by traffic
                                                                                                                                                                                                                                                               Regulating Committee                       outcomes enable us to achieve           • Improve Reputation Index              growth and financial management
                                                                                                                                                                                                                                                             • Prudent financial planning                 our financial goals and maintain                                                Delay in the Permission Decision may
                                                                                                                                                                                                                                                               to mitigate tariff reduction               service levels                                                                  impact future service
                                        ASSESS MATERIAL MATTERS                                                                                                                                                                 Technology and               • Digital strategy implemented to          • Use of innovative technology            • Achieve return on equity target       Investment in digital strategy enabled
                                                                                                                                                                                                                                digitisation                   improve operational efficiency and         enables us to respond to customer       • Improved Reputation Index             improvement in IT maturity assessment
                                                         Magnitude of effect and likelihood of occurrence                                                                                                                                                      customer service                           needs for efficiency and safety and
                                                             We classify our material matters by assessing the relevant internal and external matters identified according to the magnitude of their effect and the                                          • External expertise appointed               defend our competitive position
                                                             likelihood of their occurrence. Refer to page 34.                                                                                                                  Safety and security          • Integrated data solutions                • Major safety incidents or security      • Focused on improving airport          Investment in digitisation to improve
                                                                                                                                                                                                                                                               implemented to strengthen safety           breaches - threat prevention and          stakeholder and passenger safety      safety and security
                                                                                                                                                                                                                                                               and security                               response procedures in place.
                                                                                                                                                                                                                                                             • Partnership established with law
                                                                                                                                                                                                                                                               enforcement agencies
                                                            PRIORITISE MATERIAL MATTERS
                                                                                                                                                                                                                                Transformation               • Accelerated transformation               • Continued approach to contract          • Create job opportunities              Invested R110 million in transformation
                                                                                                                                                                                                                                                               sector strategies                          with ESD suppliers.                     • Grow black business share of          initiatives, despite constraints in our
                                                                             Material matters                                                                                                                                                                                                                                                                                             business environment
                                                                                                                                                                                                                                                             • Employee housing benefits                • 2 038 direct and 10 810 indirect          operational and developmental
                                                                                 The result of our integrated materiality determination process is a set of clearly defined and prioritised material risks and opportunities
                                                                                                                                                                                                                                                             • Employee transport                         jobs created                              spend and commercial revenue
                                                                                 that inform our strategy and have the potential to influence the execution of our strategic objectives. Refer to page 35.
                                                                                                                                                                                                                                                               solutions implemented                    • 37% of employees benefit from           • Achieve B-BBEE level

                                                                                                                                                                                                                                                                                                                                                                                                                                       INTEGRATED REPORT 2018
                                                                                                                                                                                                                                                                                                          housing solutions                       • Promote employment equity
                                                                                                                                                                                                                                                                                                        • Employees will benefit from new
                                                                                                                                                                                                                                                                                                          transport solution

                                                                                                                                                                                                                                                                                                                                                                                                                                       25
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AIRPORTS COMPANY SOUTH AFRICA   MATERIAL MATTERS CONTINUED

                                                                            Business environment, risks and opportunities                                                                                                                                                         Business environment, risks and opportunities
                                                                             • Growing demand will continue to increase pressure on airport infrastructure                                                                                                                         • Slow economic growth
                                            DEVELOP AIRPORTS                 • Regulating Committee’s approval of airport charges provides planning certainty, but delayed approval may impact our ability                                   GROW OUR FOOTPRINT                    • Increasing air service agreements and competition in Africa
                                                                                to provide excellent customer service                                                                                                                                                              • Medium to long-term regulatory uncertainty
                                                                             • Negative perceptions of South Africa and State-owned entities impact our ability to raise affordable funding                                                                                        • Opportunity to reduce concentration in core revenue by diversifying revenue sources
                                                                             • Airport development contributes to inclusive growth in a socially constrained South Africa

                                                        Our response to risks and                Impact of our response on                                                          Trade-offs to achieve our desired                                       Our response to risks and                   Impact of our response on                                                      Trade-offs to achieve our desired
                                Material matters        opportunities in 2018                    stakeholders in 2018 and beyond           Our desired outcome                      outcome                                    Material matters             opportunities in 2018                       stakeholders in 2018 and beyond         Our desired outcome                    outcome
                                Economic regulation      • Engaged with Regulating                • Tariff certainty until 2020 enabling    • Achieve return on equity target       Delays in the Permission Decision and      New growth                     • Increased engagement with                • By diversifying revenue, we reduce    • Achieve return on equity target     Increased non-core revenue to
                                                           Committee                                infrastructure investment to            • Improved Reputation Index             increasing passenger numbers may           opportunities                    African airports                           dependence on aeronautical            • Generate non-core income            R59.8 million (target: R58.8 million)
                                                         • Entrenched more progressive supply       maintain and expand airport                                                     impact future service                                                     • Increased provision of advisory            revenue, and strengthen long-term     • Grow non-aeronautical revenue       and aeronautical revenue to 49% of
                                                           chain management                         facilities                                                                                                                                                  services globally                          sustainability                        • Grow regional airport               total revenue, but did not meet the 50%
                                                                                                                                                                                                                                                              • Expanding capacity of major              • Growing our airports and                departing capacity                  KPI target .
                                Access to and cost of    • Strengthened treasury stakeholder      • Infrastructure investment develops      • Focus on improving airport            Invested R891 million in capital
                                funding                    engagement                               capacity to accommodate growth in         stakeholder and passenger             expenditure despite economic                                                domestic airports                          developing economic opportunities     • Increase O.R. Tambo International
                                                         • Strengthened governance and              demand for airport services               experience                            constraints and credit rating downgrade                                   • Engaging with industry associations        around them stimulates                  Airport (ORTIA) connectivity
                                                           operating model                                                                                                                                                                                      and airline partners and developing        regional growth and uplifts local     • Participate in non-Airports
                                                         • Prudent financial management to                                                                                                                                                                      longer term aerotropolis plans to          communities                             Company South Africa airports
                                                           support funding requirements                                                                                                                                                                         stimulate economic growth                                                          in South Africa
                                                                                                                                                                                                                                                                                                                                                 • Create job opportunities
                                Transformation           • Introduced contract participation      • CPGs ensure transformation goals        • Create job opportunities              R44 million invested in SED includes
                                                           goals (CPGs) to transform                are met on projects                     • Grow black business share of          projects to offset socio-economic
                                                           construction supply chain              • EIAs protect environmental                operational and developmental         impact of Cape Town International         Detailed information on strategic objectives and KPIs is available on pages 16 to 17.
                                                         • Appointed ESD partner to drive           sustainability during airport             spend and commercial revenue          Airport runway project
                                                           transformation goals                     development projects                    • Achieve B-BBEE level
                                                         • Achieved uncontested EIAs                                                        • Promote employment equity
                                                                                                                                            • Improve employee satisfaction

                                                                                                                                                                                                                                                                                                                                                                                                                                 INTEGRATED REPORT 2018
                                                                                                                                                                                                                                                                                                                                                                                                                                 27
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AIRPORTS COMPANY SOUTH AFRICA   MATERIAL MATTERS CONTINUED

                                IDENTIFY RELEVANT INTERNAL AND EXTERNAL MATTERS                                                                                                                                                            Stakeholder engagement
                                                                                                                                                                                                                                           Management presents a stakeholder engagement report              The following key stakeholder events were conducted during
                                Business environment
                                                                                                                                                                                                                                           to the board quarterly through the social and ethics             the year:
                                We consider internal and external matters in the assessment         management approach to mitigate against the continuous              should have a positive effect on our business activities
                                                                                                                                                                                                                                           committee. Stakeholder engagement is managed by means              • A multi-stakeholder survey engagement session with key
                                of our business environment. Our assessment includes                unpredictability of regulatory decisions, which includes the        in Ghana and improve our opportunities in other African
                                                                                                                                                                                                                                           of a board‑approved strategy, policy and procedures.                 stakeholders based on RepTrak® survey results. Refer to
                                an analysis of potential risks and opportunities in our             rationalisation of the infrastructure investment programme          economies. It is also likely to heighten competition in the
                                                                                                                                                                                                                                           Internal assurance of engagement processes identified minor          page 30
                                environment and their impact on our stakeholders and our            from time to time. This is often unfortunate in light of the        continent’s airport industry.
                                                                                                                                                                                                                                           administrative improvements. An action plan was drawn up           • A Company presentation to Parliament and meetings
                                Company. The most significant of these are discussed below.         Industry capacity requirements based on traffic volume growth
                                                                                                                                                                        The Brazilian economy emerged from a recession during 2017.        and the improvements were implemented.                               with the National Assembly’s Portfolio Committee on
                                                                                                    and the socio-economic benefits that such infrastructure
                                Aviation sector                                                                                                                         Sustained growth in 2018 is likely to impact positively on the                                                                          Transport
                                                                                                    investments would have resulted in. Refer to page 35                                                                                   Stakeholder engagement is key to determining our material
                                Increasing demand for global air travel is driven by GDP                                                                                performance of the GruPar consortium and reduce the need                                                                              • A meeting between the new Minister of Transport,
                                                                                                    for details.                                                                                                                           matters and achieving our strategic objectives. We are
                                growth, burgeoning middle-class populations, air service                                                                                for additional funding.                                                                                                                 Dr Bonginkosi (Blade) Nzimande and the board
                                                                                                                                                                                                                                           committed to purposeful and responsive relationship building
                                agreements in global and African markets, and lower air fares.      Economic environment                                                                                                                                                                                      • Distribution of the first quarterly external stakeholder
                                                                                                                                                                                                                                           with our internal and external stakeholders to achieve
                                This trend is reflected in consistent growth in recent years                                                                                                                                                                                                                    newsletter
                                                                                                    Like all businesses, our Company is affected by economic            Social environment                                                 expected outcomes that support sustainable value creation.
                                                                                                                                                                                                                                                                                                              • The launch of an annual Airports Company South Africa
                                in the number of international visitors to South Africa and
                                                                                                    trends, but we also have a responsibility to enable economic        Our Company operates in an economically constrained social
                                South Africans travelling to Africa or further afield. While this                                                                                                                                          We strengthened our stakeholder relations strategy and               golf day to prioritise stakeholder engagement with
                                                                                                    growth. As a State-owned company we are mandated by                 environment. To fulfil our mandate as an employer and a State-
                                presents a significant growth opportunity for our Company,                                                                                                                                                 engagement process with the introduction of a stakeholder            non‑aviation industry stakeholders
                                                                                                    government to provide certain aeronautical transport services       owned company, we work with our partners to make airline
                                the increasing demand places pressure on our airport facilities                                                                                                                                            relations policy which formalises our multi-level engagement       • Business-to-business industry engagements and other
                                                                                                    and to contribute positively to the South African economy.          access affordable and to improve skills development to benefit
                                and requires additional investment in the maintenance and                                                                                                                                                  plans. The engagement plans are implemented by our                   stakeholder events
                                                                                                    Growth in the domestic economy remains under pressure,              the Company and South Africa. Our transformation processes
                                expansion of airport infrastructure.                                                                                                                                                                       executives and business divisions which identify stakeholders
                                                                                                    despite signs of slow economic recovery reflected in 1.3%           form part of our business operations as we seek to create value                                                                     A key focus for the year ahead will be to complete the
                                                                                                                                                                                                                                           relevant to their activities and appoint dedicated stakeholder
                                Economic regulation                                                 GDP growth during 2017. The downgrading of Airports                 through inclusive growth that aligns the needs of our Company                                                                       implementation of our engagement plans and improve our
                                                                                                                                                                                                                                           champions to manage their engagement processes.
                                Our ability to plan for the future, achieve our strategic           Company South Africa’s credit rating, following that of the         and our partners with those of other stakeholders, including the                                                                    performance with new stakeholder engagement software.
                                objectives and create sustainable value depends on the              sovereign credit rating in April 2017 will make it more difficult   broader society in which we operate.                               A newly formed stakeholder relations team ensures that
                                                                                                                                                                                                                                                                                                              Refer to page 112 for additional information on the
                                regulation of the tariffs we charge for the use of our airport      for us to secure affordable funding in future. Our revenue                                                                             stakeholder centricity is embedded in the Company’s
                                                                                                                                                                        Technology                                                                                                                          governance of stakeholder engagement.
                                facilities and approval of our infrastructure investment            declined as a result of the 35.5% reduction in regulated                                                                               culture. The team monitors effective implementation of the
                                                                                                                                                                        Rapid advances in technology have the dual effect of               stakeholder relations strategy according to defined KPIs.        The graphic outlines our stakeholders, their material
                                programmes. In December 2016, the Regulating Committee              airport charges but this was partially offset by growth in
                                                                                                                                                                        improving efficiency and exposing businesses to the risk of        Internal awareness and support are developed through             expectations and concerns, and their role in our value
                                promulgated a five-year tariff determination (Permission            passenger numbers and an increase in non‑aeronautical
                                                                                                                                                                        disruption. Our ability to adopt innovative technology and         workshops and various other interactions to ensure the           creation process.
                                Decision) that lends stability to our operating horizon until       revenue. Lower employee costs supported our drive to contain
                                                                                                                                                                        leverage it for the purposes of safety, security, operational      strategy is implemented in line with our governance
                                2020. This creates a base for the Company’s short-term              operational costs. Although confidence has improved since
                                                                                                                                                                        efficiency and improved customer service is critical to our        framework and operating model.
                                financial and infrastructure investment planning, and our           the election of Cyril Ramaphosa as President of South Africa,
                                                                                                                                                                        global competitiveness and continued operation. We invested
                                medium-term and long-term planning is conditional on                conditions in the domestic economy are likely to remain
                                                                                                                                                                        in new digital solutions to integrate our airport management
                                the outcome of the 2019 to 2023 permission application              challenging, compounded by an increased focus on politics in 
                                                                                                                                                                        systems and implemented a comprehensive strategy to
                                which was submitted on 6 November 2017. The regulatory              the lead up to the 2019 General Election.
                                                                                                                                                                        support our intent to become a digitised business able to
                                decision received in August 2018 provides for an increase in
                                                                                                    There were signs of recovery in many other economies in             respond more effectively to opportunities and risk. More
                                airport charges of 5.8% in 2019 and no increases until 2021.
                                                                                                    Africa following a loss of growth momentum in 2016. This            details are available on page 35.
                                The Company will continue to apply a conservative financial

                                                                                                                                                                                                                                                                                                                                                                           INTEGRATED REPORT 2018
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30
AIRPORTS COMPANY SOUTH AFRICA   MATERIAL MATTERS CONTINUED

                                                                                                                                                VALUE CREATION                                                                                                 SOCIAL RESPONSIVENESS                                                                          ENABLING

                                                                                   Policy, economic regulation and
                                Our stakeholder categories                         licence to operate                              Input                                        Output                                       Dependent                                    Independent                            Partners                                         Capital and funding providers
                                Our stakeholders                                    • Government, Regulating Committee,              • Employees, unions, suppliers              • Passengers, airlines, tenants              • Community, NGOs, environmentalists         • Media and special interest groups    • Associations, partners, professional           • Shareholders, investors, lenders, credit
                                                                                      various regulators                                                                                                                                                                                                            bodies, joint venture partners, tourism          rating agencies
                                                                                                                                                                                                                                                                                                                    bodies, competitors
                                Examples of nature of engagement                    • Quarterly reviews with Regulating              • Employee roadshows and collective         • Airline operating committees               • External stakeholder newsletter,           • Brand awareness, networking and      • Providing input for International Civil        • Roadshows, results presentations
                                                                                      Committee                                        bargaining structures                     • External stakeholder newsletter, social      website and events                             stakeholder hospitality              Aviation Organisation (ICAO) regional            and AGMs
                                                                                    • Reports and engagements with the               • Preferential procurement programmes         media, and ASQ programmes for              • Stakeholder meetings and                                                            bodies, African Civil Aviation Commission      • Rating reviews
                                                                                      Department of Labour                             and tender processes for suppliers          passengers                                   task team forums                                                                  • Meeting with airline associations              • Meetings with institutional bond holders,
                                                                                                                                                                                                                                                                                                                                                                     funders and investors
                                Examples of expectations and concerns               • Long-term industry sustainability and          • Fair and transparent remuneration with    • Negotiated low airport charges for         • Job creation                               •   Airline failures                   • Long-term industry sustainability              • Sound financial performance, return
                                                                                      licence to operate                               job security and career progression         airlines                                   • Community development                      •   Unethical business practices       • Compliance with regulator licensing              on equity and dividends
                                                                                    • Alignment to government mandates               • Transformation and ease of doing          • Access to infrastructure, support and      • Environmental sustainability               •   Airport safety and security          requirements                                   • Strong governance and regulatory
                                                                                      and social development programmes                business for suppliers                      information for tenants                                                                 •   Customer satisfaction              • Industry safety and security                     compliance
                                                                                      (e.g. NDP and UN Sustainable                                                               • Understanding passenger and partner
                                                                                      Development Goals)                                                                           needs
                                                                                    • Regulatory compliance
                                Benchmarking or assessment                          • RepTrak®                                       • RepTrak®                                  • RepTrak®                                   • RepTrak®                                   • RepTrak®                             • RepTrak®                                       • Assurance of annual financial statements
                                                                                                                                     • Leadership culture index                  • Operational stakeholder survey                                                          • ASQ                                  • Operational stakeholder survey                 • Credit rating agency assessments
                                                                                                                                     • Employee satisfaction survey              • ASQ                                                                                                                                                                             • RepTrak®
                                Most of our benchmarking or assessments are independent and externally evaluated. For additional information refer to pages 62 to 63.

                                                                                                                                                                                                                                                                                                                                                                                                                 INTEGRATED REPORT 2018
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